Ethereum DApp trading volume increases 38% in one month. Will ETH price follow suit?

Ethereum (ETH) price struggled to maintain levels above $3,200 from September 13th to September 19th. However, it has improved on-chain metrics, especially when compared to some of Ethereum’s direct competitors. Now, traders are questioning how long it will take for Ethereum to resume its bull run, given its dominance in terms of fees and network deposits.

No blockchain has come close to Ethereum’s $149.9 billion in on-chain transaction volume over the past 30 days. The second largest competitor, BNB Chain (BNB), was 82% smaller at just $26.6 billion despite offering much lower transaction fees. More importantly, activity on Ethereum has increased by 37.7% over the past month, while trading volume on the BNB chain has decreased by 6%.

Ethereum dominates in terms of fees, TVL, and staking rewards.

Critics argue that Ethereum’s average transaction fee of $7.50 hinders growth and retail adoption, but this view overlooks the growing use of layer 2 scaling solutions such as Arbitrum, Base, and Optimism. Ultimately, these networks rely on Ethereum’s base layer for security and finality, creating more independent validators and incentives for deposits.

The impressive growth of the Solana network is likely Ethereum’s biggest Achilles heel. This is evidenced by an incredible 83% on-chain volume growth, driven by a total value locked (TVL) of $8.3 billion. Despite having significantly lower deposits compared to Ethereum’s $59.4 billion, Solana leads the way in decentralized exchange (DEX) trading volume.

Ethereum remains the dominant force in the fees sector, which is critical to network security, generating $163.7 million in fees over a 30-day period, according to DefiLlama. On the other hand, Solana earned $133.4 million in fees during the same period, and Tron ranked third with $51 million. Interestingly, Solana’s three main decentralized applications (DApps) – Raydium, Jito, and Photon – generated an impressive $338.5 million in fees within 30 days.

Ethereum critics point out that layer 2 rollup solutions do not generate sufficient fees, but Solana also faces similar problems. SOL (SOL) stakers and investors do not profit from the success of the DApp. According to StakeRewards, Solana’s staking reward rate is 6.2% per year, while the corresponding SOL inflation rate is 5.2%, meaning adjusted gains are much smaller.

Ethereum staking rewards and ETH inflation rate. Source: StakeRewards

In contrast, Ethereum staking offers an annual reward rate of 3.3%, while the corresponding ETH inflation rate is less than 0.7%. This difference may seem minor at first, but Ethereum’s 2.6% adjusted yield compared to Solana’s 1% is a much more attractive proposition. In effect, this puts Ethereum in a position to secure institutional deposits, which is a key factor in maintaining its lead in Total Value Locked (TVL).

relevant: Solana-based DApps see record fee hikes amid memecoin craze

Ethereum’s biggest challenge appears to be the lack of a clear strategy for achieving scalability without disrupting the layer 2 ecosystem, which currently benefits from blob space and relatively cheap state bridging. Ethereum 3.0 aims to improve scalability by reintroducing sharding and leveraging the zero-knowledge Ethereum virtual machine (zkEVM) at the base layer.

This innovative scaling approach allows you to increase transactions per second by enabling multiple execution shards. Joe Lubin sees this as a way to aggregate calculations, while some speculate that it could eventually eliminate rollups. However, achieving these goals may take years.

From an on-chain perspective and a competitive advantage, Ether has the potential to surpass the broader altcoin market cap, but its success will depend on providing a roadmap.